Written on behalf of Feigenbaum Consulting
With the Canadian federal election now close to two months behind us, the Liberal Government has sworn in a new cabinet and plans to return to the House of Commons later this month. An item on the minds of many Canadians is what to expect from next year’s budget and the government’s economic plans. Many Canadian businesses and individuals are still dealing with the fallout of the COVID-19 pandemic. The government will only be tabling its budget once Parliament resumes, but there are some hints on what Canadians, including businesses and individuals might expect as the calendar turns to 2022.
What can businesses expect from the economy?
Like many individuals, businesses are still feeling the impact of COVID-19 on their bottom line. Whether their problems are related to paying for rent, or keeping staff employed, there are a large number of businesses that have been relying on the government for help. Many of the programs offering assistance can be expected to continue for at least the short term.
The government plans to extend the Canada Recovery Hiring Program through to May 7, 2022. The program allows eligible employers to receive a subsidy on salaries or wages if they were hit hard by COVID-19. This is in addition to the Canada Emergency Wage Subsidy which is similar to the CRHP but focuses on the re-hiring of people who were let go during the pandemic. The government hopes to extend this program through to March 13. Finally, the Liberals have announced they intend to extend rent support for the tourism industry (as well as wage support) that covers up to 75% of expenses for businesses in that industry.
While there is help coming to some types of business, the government has also set its sights on ways to earn revenue, with a notable announcement being reported for plans to raise up to $10.8 billion by increasing tax on banks and insurance companies. Bloomberg reported that businesses in those sectors who make more than $1 billion annually will see their corporate tax rates increase to 18% from 15%. This will be coupled with an effort to collect tax from shelters in order to reach the lofty goal that has been set.
Health care professionals who are looking to set up a new practice have been told that $15,000 in tax deductions will be made available to them over the first three years following the establishment of a practice.
Another way the Liberals plan to raise revenue is by limiting the amount of interest that a business can deduct. These plans include a first-year reduction of 40%, and a second-year reduction of 30%. There are few details surrounding these plans, but the Liberals have added they want to look towards limiting excessive deductions by large corporations, and that they will look towards enforcing tax payments that should be made to Canada by multi-national corporations.
The environment continues to be a hot topic across all areas of politics, and the economy is no exception. The Liberals have announced that they plan to introduce corporate tax measures that have environmental strings attached, including a tax credit of up to 30% for businesses that bring “clean technologies” to their workplace or industry. The government also plans to encourage the purchase of zero-emission vehicles by extending a rebate worth up to $5,000 on such vehicles purchased by businesses. It should be noted that this program also offers rebates to individuals who purchase eligible vehicles. More information on the program, including the amount people can expect back for specific vehicles, can be found here.
What about individual taxpayers?
Individual taxpayers may be wondering what the new year has in store for their personal finances. Promises made by the Liberals during the campaign give us some clues as to what to expect.
On the campaign trail, the Liberals indicated they would target high-income earners, including a new highest tax bracket, which would see the country’s highest income earners pay at least 15% in income tax. As it currently stands, the highest tax bracket for federal income tax is anything over $216,511. There were also promises that a new luxury tax would be imposed on very high-end cars, private aircraft, and “pleasure boats.”
Other individual tax plans reported include a continuance of the home office flat rate deduction that was made available during COVID-19. The program will continue through 2021 and 2022 and the maximum deduction has been increased to $500 for those two years.
While details are vague, the Liberals have also indicated they are planning to reduce the incentives for house flipping and speculation practices. The plan states that if people hold onto property for fewer than 12 months before flipping it, they will be subject to a yet-to-be-determined tax.
Additionally, the Liberals announced plans to extend a tax on vacant homes owned by people outside of Canada. The program may also see a tax applied to undeveloped land in urban centers owned by foreign people or companies. On the other side of the housing market, the Liberals have promised a program to allow first-time homeowners to save up to $40,000 tax-free to put towards the purchase of their first home.
At Feigenbaum Law, we understand that tax planning is crucial to the financial plans of any individual or business. Our financial team has a background in both US and Canadian tax issues, and enjoys opportunities to work with people or corporations with business or tax issues on both sides of the US/Canada border. We help our clients make informed choices that lead to a reduction in their overall tax burden while also helping our clients ensure they are maintaining tax compliance and avoiding costly penalties.
Please reach us online or by phone at 877-275-4792 to learn how we can help you or your business avoid the liabilities and pitfalls that result from improper tax planning.